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Free State Tax File

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Free State Tax File

Free state tax file 20. Free state tax file   Standard Deduction Table of Contents What's New Introduction Standard Deduction Amount Standard Deduction for Dependents Who Should ItemizeWhen to itemize. Free state tax file Married persons who filed separate returns. Free state tax file What's New Standard deduction increased. Free state tax file  The standard deduction for some taxpayers who do not itemize their deductions on Schedule A (Form 1040) is higher for 2013 than it was for 2012. Free state tax file The amount depends on your filing status. Free state tax file You can use the 2013 Standard Deduction Tables in this chapter to figure your standard deduction. Free state tax file Introduction This chapter discusses the following topics. Free state tax file How to figure the amount of your standard deduction. Free state tax file The standard deduction for dependents. Free state tax file Who should itemize deductions. Free state tax file Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions. Free state tax file If you have a choice, you can use the method that gives you the lower tax. Free state tax file The standard deduction is a dollar amount that reduces your taxable income. Free state tax file It is a benefit that eliminates the need for many taxpayers to itemize actual deductions, such as medical expenses, charitable contributions, and taxes, on Schedule A (Form 1040). Free state tax file The standard deduction is higher for taxpayers who: Are 65 or older, or Are blind. Free state tax file You benefit from the standard deduction if your standard deduction is more than the total of your allowable itemized deductions. Free state tax file Persons not eligible for the standard deduction. Free state tax file   Your standard deduction is zero and you should itemize any deductions you have if: Your filing status is married filing separately, and your spouse itemizes deductions on his or her return, You are filing a tax return for a short tax year because of a change in your annual accounting period, or You are a nonresident or dual-status alien during the year. Free state tax file You are considered a dual-status alien if you were both a nonresident and resident alien during the year. Free state tax file Note. Free state tax file If you are a nonresident alien who is married to a U. Free state tax file S. Free state tax file citizen or resident alien at the end of the year, you can choose to be treated as a U. Free state tax file S. Free state tax file resident. Free state tax file (See Publication 519, U. Free state tax file S. Free state tax file Tax Guide for Aliens. Free state tax file ) If you make this choice, you can take the standard deduction. Free state tax file If an exemption for you can be claimed on another person's return (such as your parents' return), your standard deduction may be limited. Free state tax file See Standard Deduction for Dependents, later. Free state tax file Standard Deduction Amount The standard deduction amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer. Free state tax file Generally, the standard deduction amounts are adjusted each year for inflation. Free state tax file The standard deduction amounts for most people are shown in Table 20-1. Free state tax file Decedent's final return. Free state tax file   The standard deduction for a decedent's final tax return is the same as it would have been had the decedent continued to live. Free state tax file However, if the decedent was not 65 or older at the time of death, the higher standard deduction for age cannot be claimed. Free state tax file Higher Standard Deduction for Age (65 or Older) If you are age 65 or older on the last day of the year and do not itemize deductions, you are entitled to a higher standard deduction. Free state tax file You are considered 65 on the day before your 65th birthday. Free state tax file Therefore, you can take a higher standard deduction for 2013 if you were born before January 2, 1949. Free state tax file Use Table 20-2 to figure the standard deduction amount. Free state tax file Higher Standard Deduction for Blindness If you are blind on the last day of the year and you do not itemize deductions, you are entitled to a higher standard deduction. Free state tax file Not totally blind. Free state tax file   If you are not totally blind, you must get a certified statement from an eye doctor (ophthalmologist or optometrist) that: You cannot see better than 20/200 in the better eye with glasses or contact lenses, or Your field of vision is 20 degrees or less. Free state tax file   If your eye condition is not likely to improve beyond these limits, the statement should include this fact. Free state tax file You must keep the statement in your records. Free state tax file   If your vision can be corrected beyond these limits only by contact lenses that you can wear only briefly because of pain, infection, or ulcers, you can take the higher standard deduction for blindness if you otherwise qualify. Free state tax file Spouse 65 or Older or Blind You can take the higher standard deduction if your spouse is age 65 or older or blind and: You file a joint return, or You file a separate return and can claim an exemption for your spouse because your spouse had no gross income and cannot be claimed as a dependent by another taxpayer. Free state tax file You cannot claim the higher standard deduction for an individual other than yourself and your spouse. Free state tax file Examples The following examples illustrate how to determine your standard deduction using Tables 20-1 and 20-2. Free state tax file Example 1. Free state tax file Larry, 46, and Donna, 33, are filing a joint return for 2013. Free state tax file Neither is blind, and neither can be claimed as a dependent. Free state tax file They decide not to itemize their deductions. Free state tax file They use Table 20-1. Free state tax file Their standard deduction is $12,200. Free state tax file Example 2. Free state tax file The facts are the same as in Example 1 except that Larry is blind at the end of 2013. Free state tax file Larry and Donna use Table 20-2. Free state tax file Their standard deduction is $13,400. Free state tax file Example 3. Free state tax file Bill and Lisa are filing a joint return for 2013. Free state tax file Both are over age 65. Free state tax file Neither is blind, and neither can be claimed as a dependent. Free state tax file If they do not itemize deductions, they use Table 20-2. Free state tax file Their standard deduction is $14,600. Free state tax file Standard Deduction for Dependents The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the greater of: $1,000, or The individual's earned income for the year plus $350 (but not more than the regular standard deduction amount, generally $6,100). Free state tax file However, if the individual is 65 or older or blind, the standard deduction may be higher. Free state tax file If you (or your spouse, if filing jointly) can be claimed as a dependent on someone else's return, use Table 20-3 to determine your standard deduction. Free state tax file Earned income defined. Free state tax file   Earned income is salaries, wages, tips, professional fees, and other amounts received as pay for work you actually perform. Free state tax file    For purposes of the standard deduction, earned income also includes any part of a scholarship or fellowship grant that you must include in your gross income. Free state tax file See Scholarships and fellowships in chapter 12 for more information on what qualifies as a scholarship or fellowship grant. Free state tax file Example 1. Free state tax file Michael is single. Free state tax file His parents can claim an exemption for him on their 2013 tax return. Free state tax file He has interest income of $780 and wages of $150. Free state tax file He has no itemized deductions. Free state tax file Michael uses Table 20-3 to find his standard deduction. Free state tax file He enters $150 (his earned income) on line 1, $500 ($150 + $350) on line 3, $1,000 (the larger of $500 and $1,000) on line 5, and $6,100 on line 6. Free state tax file His standard deduction, on line 7a, is $1,000 (the smaller of $1,000 and $6,100). Free state tax file Example 2. Free state tax file Joe, a 22-year-old full-time college student, can be claimed as a dependent on his parents' 2013 tax return. Free state tax file Joe is married and files a separate return. Free state tax file His wife does not itemize deductions on her separate return. Free state tax file Joe has $1,500 in interest income and wages of $3,800. Free state tax file He has no itemized deductions. Free state tax file Joe finds his standard deduction by using Table 20-3. Free state tax file He enters his earned income, $3,800 on line 1. Free state tax file He adds lines 1 and 2 and enters $4,150 on line 3. Free state tax file On line 5, he enters $4,150, the larger of lines 3 and 4. Free state tax file Because Joe is married filing a separate return, he enters $6,100 on line 6. Free state tax file On line 7a he enters $4,150 as his standard deduction because it is smaller than $6,100, the amount on line 6. Free state tax file Example 3. Free state tax file Amy, who is single, can be claimed as a dependent on her parents' 2013 tax return. Free state tax file She is 18 years old and blind. Free state tax file She has interest income of $1,300 and wages of $2,900. Free state tax file She has no itemized deductions. Free state tax file Amy uses Table 20-3 to find her standard deduction. Free state tax file She enters her wages of $2,900 on line 1. Free state tax file She adds lines 1 and 2 and enters $3,250 on line 3. Free state tax file On line 5, she enters $3,250, the larger of lines 3 and 4. Free state tax file Because she is single, Amy enters $6,100 on line 6. Free state tax file She enters $3,250 on line 7a. Free state tax file This is the smaller of the amounts on lines 5 and 6. Free state tax file Because she checked one box in the top part of the worksheet, she enters $1,500 on line 7b. Free state tax file She then adds the amounts on lines 7a and 7b and enters her standard deduction of $4,750 on line 7c. Free state tax file Example 4. Free state tax file Ed is single. Free state tax file His parents can claim an exemption for him on their 2013 tax return. Free state tax file He has wages of $7,000, interest income of $500, and a business loss of $3,000. Free state tax file He has no itemized deductions. Free state tax file Ed uses Table 20-3 to figure his standard deduction. Free state tax file He enters $4,000 ($7,000 - $3,000) on line 1. Free state tax file He adds lines 1 and 2 and enters $4,350 on line 3. Free state tax file On line 5 he enters $4,350, the larger of lines 3 and 4. Free state tax file Because he is single, Ed enters $6,100 on line 6. Free state tax file On line 7a he enters $4,350 as his standard deduction because it is smaller than $6,100, the amount on line 6. Free state tax file Who Should Itemize You should itemize deductions if your total deductions are more than the standard deduction amount. Free state tax file Also, you should itemize if you do not qualify for the standard deduction, as discussed earlier under Persons not eligible for the standard deduction . Free state tax file You should first figure your itemized deductions and compare that amount to your standard deduction to make sure you are using the method that gives you the greater benefit. Free state tax file You may be subject to a limit on some of your itemized deductions if your adjusted gross income is more than: $250,000 if single ($275,000 if head of household, $300,000 if married filing jointly or qualifying widow(er); or $150,000 if married filing separately). Free state tax file See chapter 29 or the instructions for Schedule A (Form 1040) for more information on figuring the correct amount of your itemized deductions. Free state tax file When to itemize. Free state tax file   You may benefit from itemizing your deductions on Schedule A (Form 1040) if you: Do not qualify for the standard deduction, or the amount you can claim is limited, Had large uninsured medical and dental expenses during the year, Paid interest and taxes on your home, Had large unreimbursed employee business expenses or other miscellaneous deductions, Had large uninsured casualty or theft losses, Made large contributions to qualified charities, or Have total itemized deductions that are more than the standard deduction to which you otherwise are entitled. Free state tax file These deductions are explained in chapters 21–28. Free state tax file    If you decide to itemize your deductions, complete Schedule A and attach it to your Form 1040. Free state tax file Enter the amount from Schedule A, line 29, on Form 1040, line 40. Free state tax file Electing to itemize for state tax or other purposes. Free state tax file   Even if your itemized deductions are less than your standard deduction, you can elect to itemize deductions on your federal return rather than take the standard deduction. Free state tax file You may want to do this if, for example, the tax benefit of itemizing your deductions on your state tax return is greater than the tax benefit you lose on your federal return by not taking the standard deduction. Free state tax file To make this election, you must check the box on line 30 of Schedule A. Free state tax file Changing your mind. Free state tax file   If you do not itemize your deductions and later find that you should have itemized — or if you itemize your deductions and later find you should not have — you can change your return by filing Form 1040X, Amended U. Free state tax file S. Free state tax file Individual Income Tax Return. Free state tax file See Amended Returns and Claims for Refund in chapter 1 for more information on amended returns. Free state tax file Married persons who filed separate returns. Free state tax file   You can change methods of taking deductions only if you and your spouse both make the same changes. Free state tax file Both of you must file a consent to assessment for any additional tax either one may owe as a result of the change. Free state tax file    You and your spouse can use the method that gives you the lower total tax, even though one of you may pay more tax than you would have paid by using the other method. Free state tax file You both must use the same method of claiming deductions. Free state tax file If one itemizes deductions, the other should itemize because he or she will not qualify for the standard deduction. Free state tax file See Persons not eligible for the standard deduction , earlier. Free state tax file 2013 Standard Deduction Tables If you are married filing a separate return and your spouse itemizes deductions, or if you are a dual-status alien, you cannot take the standard deduction even if you were born before January 2, 1949, or are blind. Free state tax file Table 20-1. Free state tax file Standard Deduction Chart for Most People* If your filing status is. Free state tax file . Free state tax file . Free state tax file Your standard deduction is: Single or Married filing separately $6,100 Married filing jointly or Qualifying widow(er) with dependent child 12,200 Head of household 8,950 *Do not use this chart if you were born before January 2, 1949, are blind, or if someone else can claim you (or your spouse if filing jointly) as a dependent. Free state tax file Use Table 20-2 or 20-3 instead. Free state tax file Table 20-2. Free state tax file Standard Deduction Chart for People Born Before January 2, 1949, or Who are Blind Check the correct number of boxes below. Free state tax file Then go to the chart. Free state tax file You: Born before January 2, 1949 □ Blind □ Your spouse, if claiming spouse's exemption: Born before January 2, 1949 □ Blind □ Total number of boxes checked   IF  your filing status is. Free state tax file . Free state tax file . Free state tax file AND the number in the box above is. Free state tax file . Free state tax file . Free state tax file THEN your standard deduction is. Free state tax file . Free state tax file . Free state tax file Single 1 $7,600   2 9,100 Married filing jointly 1 $13,400 or Qualifying 2 14,600 widow(er) with 3 15,800 dependent child 4 17,000 Married filing 1 $7,300 separately 2 8,500   3 9,700   4 10,900 Head of household 1 $10,450   2 11,950 *If someone else can claim you (or your spouse if filing jointly) as a dependent, use Table 20-3 instead. Free state tax file Table 20-3. Free state tax file Standard Deduction Worksheet for Dependents Use this worksheet only if someone else can claim you (or your spouse if filing jointly) as a dependent. Free state tax file Check the correct number of boxes below. Free state tax file Then go to the worksheet. Free state tax file You:   Born before January 2, 1949 □ Blind □ Your spouse, if claiming spouse's exemption: Born before January 2, 1949 □ Blind □ Total number of boxes checked 1. Free state tax file Enter your earned income (defined below). Free state tax file If none, enter -0-. Free state tax file 1. Free state tax file   2. Free state tax file Additional amount. Free state tax file 2. Free state tax file $350 3. Free state tax file Add lines 1 and 2. Free state tax file 3. Free state tax file   4. Free state tax file Minimum standard deduction. Free state tax file 4. Free state tax file $1,000 5. Free state tax file Enter the larger of line 3 or line 4. Free state tax file 5. Free state tax file   6. Free state tax file Enter the amount shown below for your filing status. Free state tax file Single or Married filing separately—$6,100 Married filing jointly—$12,200 Head of household—$8,950 6. Free state tax file   7. Free state tax file Standard deduction. Free state tax file         a. Free state tax file Enter the smaller of line 5 or line 6. Free state tax file If born after January 1, 1949, and not blind, stop here. Free state tax file This is your standard deduction. Free state tax file Otherwise, go on to line 7b. Free state tax file 7a. Free state tax file     b. Free state tax file If born before January 2, 1949, or blind, multiply $1,500 ($1,200 if married) by the number in the box above. Free state tax file 7b. Free state tax file     c. Free state tax file Add lines 7a and 7b. Free state tax file This is your standard deduction for 2013. Free state tax file 7c. Free state tax file   Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Free state tax file It also includes any amount received as a scholarship that you must include in your income. Free state tax file Prev  Up  Next   Home   More Online Publications
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IRS VITA Grant Program

The Volunteer Income Tax Assistance (VITA) Grant Program is an IRS initiative designed to promote and support free tax preparation service for the underserved, in both urban and non-urban locations. Service is targeted to low-to-moderate income individuals, persons with disabilities, the elderly, and limited English speaking. IRS awards matching grants each year to organizations that offer free tax preparation services during the tax filing season at locations in all 50 states and the District of Columbia. Congress appropriates this funding to support the Volunteer Income Tax Assistance Program.

This Grant Program is intended to provide direct funds to organizations to:

  • Enable VITA Programs to extend services to underserved populations in hardest-to-reach areas, both urban and non-urban;
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This webpage serves as a resource for organizations interested in applying for a VITA Grant as well as for organizations who have been awarded a grant.

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Contact the VITA Grant Program at Grant.Program.Office@irs.gov.

Page Last Reviewed or Updated: 07-Nov-2013

The Free State Tax File

Free state tax file 7. Free state tax file   Costs You Can Deduct or Capitalize Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Carrying Charges Research and Experimental CostsProduct. Free state tax file Costs not included. Free state tax file Intangible Drilling Costs Exploration CostsPartnerships and S corporations. Free state tax file Development Costs Circulation Costs Business Start-Up and Organizational Costs Reforestation Costs Retired Asset Removal Costs Barrier Removal CostsOther barrier removals. Free state tax file Film and Television Production Costs What's New Film and television productions costs. Free state tax file  The election to expense film and television production costs does not apply to productions that begin after December 31, 2013. Free state tax file See Film and Television Production Costs , later. Free state tax file Introduction This chapter discusses costs you can elect to deduct or capitalize. Free state tax file You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it. Free state tax file If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. Free state tax file When you capitalize a cost, you add it to the basis of property to which it relates. Free state tax file A partnership, corporation, estate, or trust makes the election to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. Free state tax file Each individual partner, shareholder, or beneficiary elects whether to deduct or capitalize exploration costs. Free state tax file You may be subject to the alternative minimum tax (AMT) if you deduct research and experimental, intangible drilling, exploration, development, circulation, or business organizational costs. Free state tax file For more information on the alternative minimum tax, see the instructions for the following forms. Free state tax file Form 6251, Alternative Minimum Tax—Individuals. Free state tax file Form 4626, Alternative Minimum Tax—Corporations. Free state tax file Topics - This chapter discusses: Carrying charges Research and experimental costs Intangible drilling costs Exploration costs Development costs Circulation costs Qualified disaster expenses Business start-up and organizational costs Reforestation costs Retired asset removal costs Barrier removal costs Film and television production costs Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 3468 Investment Credit 8826 Disabled Access Credit See chapter 12 for information about getting publications and forms. Free state tax file Carrying Charges Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. Free state tax file Certain carrying charges must be capitalized under the uniform capitalization rules. Free state tax file (For information on capitalization of interest, see chapter 4 . Free state tax file ) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible. Free state tax file You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. Free state tax file For unimproved and unproductive real property, your election is good for only 1 year. Free state tax file You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. Free state tax file For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. Free state tax file For personal property, your election is effective until the date you install or first use it, whichever is later. Free state tax file How to make the election. Free state tax file   To make the election to capitalize a carrying charge, attach a statement to your original tax return for the year the election is to be effective indicating which charges you are electing to capitalize. Free state tax file However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free state tax file Attach the statement to the amended return and write “Filed pursuant to section 301. Free state tax file 9100-2” on the statement. Free state tax file File the amended return at the same address you filed the original return. Free state tax file Research and Experimental Costs The costs of research and experimentation are generally capital expenses. Free state tax file However, you can elect to deduct these costs as a current business expense. Free state tax file Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change. Free state tax file If you meet certain requirements, you may elect to defer and amortize research and experimental costs. Free state tax file For information on electing to defer and amortize these costs, see Research and Experimental Costs in chapter 8. Free state tax file Research and experimental costs defined. Free state tax file   Research and experimental costs are reasonable costs you incur in your trade or business for activities intended to provide information that would eliminate uncertainty about the development or improvement of a product. Free state tax file Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. Free state tax file Whether costs qualify as research and experimental costs depends on the nature of the activity to which the costs relate rather than on the nature of the product or improvement being developed or the level of technological advancement. Free state tax file      The costs of obtaining a patent, including attorneys' fees paid or incurred in making and perfecting a patent application, are research and experimental costs. Free state tax file However, costs paid or incurred to obtain another's patent are not research and experimental costs. Free state tax file Product. Free state tax file   The term “product” includes any of the following items. Free state tax file Formula. Free state tax file Invention. Free state tax file Patent. Free state tax file Pilot model. Free state tax file Process. Free state tax file Technique. Free state tax file Property similar to the items listed above. Free state tax file It also includes products used by you in your trade or business or held for sale, lease, or license. Free state tax file Costs not included. Free state tax file   Research and experimental costs do not include expenses for any of the following activities. Free state tax file Advertising or promotions. Free state tax file Consumer surveys. Free state tax file Efficiency surveys. Free state tax file Management studies. Free state tax file Quality control testing. Free state tax file Research in connection with literary, historical, or similar projects. Free state tax file The acquisition of another's patent, model, production, or process. Free state tax file When and how to elect. Free state tax file   You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. Free state tax file If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS. Free state tax file Deducting or Amortizing Research and Experimentation Costs IF you . Free state tax file . Free state tax file . Free state tax file THEN . Free state tax file . Free state tax file . Free state tax file Elect to deduct research and experimental costs as a current business expense Deduct all research and experimental costs in the first year you pay or incur the costs and all later years. Free state tax file Do not deduct research and experimental costs as a current business expense If you meet the requirements, amortize them over at least 60 months, starting with the month you first receive an economic benefit from the research. Free state tax file See Research and Experimental Costs in chapter 8. Free state tax file Research credit. Free state tax file   If you pay or incur qualified research expenses, you may be able to take the research credit. Free state tax file For more information see Form 6765, Credit for Increasing Research Activities and its instructions. Free state tax file Intangible Drilling Costs The costs of developing oil, gas, or geothermal wells are ordinarily capital expenditures. Free state tax file You can usually recover them through depreciation or depletion. Free state tax file However, you can elect to deduct intangible drilling costs (IDCs) as a current business expense. Free state tax file These are certain drilling and development costs for wells in the United States in which you hold an operating or working interest. Free state tax file You can deduct only costs for drilling or preparing a well for the production of oil, gas, or geothermal steam or hot water. Free state tax file You can elect to deduct only the costs of items with no salvage value. Free state tax file These include wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production. Free state tax file Your cost for any drilling or development work done by contractors under any form of contract is also an IDC. Free state tax file However, see Amounts paid to contractor that must be capitalized , later. Free state tax file You can also elect to deduct the cost of drilling exploratory bore holes to determine the location and delineation of offshore hydrocarbon deposits if the shaft is capable of conducting hydrocarbons to the surface on completion. Free state tax file It does not matter whether there is any intent to produce hydrocarbons. Free state tax file If you do not elect to deduct your IDCs as a current business expense, you can elect to deduct them over the 60-month period beginning with the month they were paid or incurred. Free state tax file Amounts paid to contractor that must be capitalized. Free state tax file   Amounts paid to a contractor must be capitalized if they are either: Amounts properly allocable to the cost of depreciable property, or Amounts paid only out of production or proceeds from production if these amounts are depletable income to the recipient. Free state tax file How to make the election. Free state tax file   You elect to deduct IDCs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. Free state tax file No formal statement is required. Free state tax file If you file Schedule C (Form 1040), enter these costs under “Other expenses. Free state tax file ”   For oil and gas wells, your election is binding for the year it is made and for all later years. Free state tax file For geothermal wells, your election can be revoked by the filing of an amended return on which you do not take the deduction. Free state tax file You can file the amended return for the year up to the normal time of expiration for filing a claim for credit or refund, generally, within 3 years after the date you filed the original return or within 2 years after the date you paid the tax, whichever is later. Free state tax file Energy credit for costs of geothermal wells. Free state tax file   If you capitalize the drilling and development costs of geothermal wells that you place in service during the tax year, you may be able to claim a business energy credit. Free state tax file See the Instructions for Form 3468 for more information. Free state tax file Nonproductive well. Free state tax file   If you capitalize your IDCs, you have another option if the well is nonproductive. Free state tax file You can deduct the IDCs of the nonproductive well as an ordinary loss. Free state tax file You must indicate and clearly state your election on your tax return for the year the well is completed. Free state tax file Once made, the election for oil and gas wells is binding for all later years. Free state tax file You can revoke your election for a geothermal well by filing an amended return that does not claim the loss. Free state tax file Costs incurred outside the United States. Free state tax file   You cannot deduct as a current business expense all the IDCs paid or incurred for an oil, gas, or geothermal well located outside the United States. Free state tax file However, you can elect to include the costs in the adjusted basis of the well to figure depletion or depreciation. Free state tax file If you do not make this election, you can deduct the costs over the 10-year period beginning with the tax year in which you paid or incurred them. Free state tax file These rules do not apply to a nonproductive well. Free state tax file Exploration Costs The costs of determining the existence, location, extent, or quality of any mineral deposit are ordinarily capital expenditures if the costs lead to the development of a mine. Free state tax file You recover these costs through depletion as the mineral is removed from the ground. Free state tax file However, you can elect to deduct domestic exploration costs paid or incurred before the beginning of the development stage of the mine (except those for oil and gas wells). Free state tax file How to make the election. Free state tax file   You elect to deduct exploration costs by taking the deduction on your income tax return, or on an amended income tax return, for the first tax year for which you wish to deduct the costs paid or incurred during the tax year. Free state tax file Your return must adequately describe and identify each property or mine, and clearly state how much is being deducted for each one. Free state tax file The election applies to the tax year you make this election and all later tax years. Free state tax file Partnerships and S corporations. Free state tax file   Each partner, not the partnership, elects whether to capitalize or to deduct that partner's share of exploration costs. Free state tax file Each shareholder, not the S corporation, elects whether to capitalize or to deduct that shareholder's share of exploration costs. Free state tax file Reduced corporate deductions for exploration costs. Free state tax file   A corporation (other than an S corporation) can deduct only 70% of its domestic exploration costs. Free state tax file It must capitalize the remaining 30% of costs and amortize them over the 60-month period starting with the month the exploration costs are paid or incurred. Free state tax file A corporation may also elect to capitalize and amortize mining exploration costs over a 10-year period. Free state tax file For more information on this method of amortization, see Internal Revenue Code section 59(e). Free state tax file   The 30% the corporation capitalizes cannot be added to its basis in the property to figure cost depletion. Free state tax file However, the amount amortized is treated as additional depreciation and is subject to recapture as ordinary income on a disposition of the property. Free state tax file See Section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. Free state tax file   These rules also apply to the deduction of development costs by corporations. Free state tax file See Development Costs , later. Free state tax file Recapture of exploration expenses. Free state tax file   When your mine reaches the producing stage, you must recapture any exploration costs you elected to deduct. Free state tax file Use either of the following methods. Free state tax file Method 1—Include the deducted costs in gross income for the tax year the mine reaches the producing stage. Free state tax file Your election must be clearly indicated on the return. Free state tax file Increase your adjusted basis in the mine by the amount included in income. Free state tax file Generally, you must elect this recapture method by the due date (including extensions) of your return. Free state tax file However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free state tax file Make the election on your amended return and write “Filed pursuant to section 301. Free state tax file 9100-2” on the form where you are including the income. Free state tax file File the amended return at the same address you filed the original return. Free state tax file Method 2—Do not claim any depletion deduction for the tax year the mine reaches the producing stage and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. Free state tax file   You also must recapture deducted exploration costs if you receive a bonus or royalty from mine property before it reaches the producing stage. Free state tax file Do not claim any depletion deduction for the tax year you receive the bonus or royalty and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. Free state tax file   Generally, if you dispose of the mine before you have fully recaptured the exploration costs you deducted, recapture the balance by treating all or part of your gain as ordinary income. Free state tax file Under these circumstances, you generally treat as ordinary income all of your gain if it is less than your adjusted exploration costs with respect to the mine. Free state tax file If your gain is more than your adjusted exploration costs, treat as ordinary income only a part of your gain, up to the amount of your adjusted exploration costs. Free state tax file Foreign exploration costs. Free state tax file   If you pay or incur exploration costs for a mine or other natural deposit located outside the United States, you cannot deduct all the costs in the current year. Free state tax file You can elect to include the costs (other than for an oil, gas, or geothermal well) in the adjusted basis of the mineral property to figure cost depletion. Free state tax file (Cost depletion is discussed in chapter 9 . Free state tax file ) If you do not make this election, you must deduct the costs over the 10-year period beginning with the tax year in which you pay or incur them. Free state tax file These rules also apply to foreign development costs. Free state tax file Development Costs You can deduct costs paid or incurred during the tax year for developing a mine or any other natural deposit (other than an oil or gas well) located in the United States. Free state tax file These costs must be paid or incurred after the discovery of ores or minerals in commercially marketable quantities. Free state tax file Development costs also include depreciation on improvements used in the development of ores or minerals and costs incurred for you by a contractor. Free state tax file Development costs do not include the costs for the acquisition or improvement of depreciable property. Free state tax file Instead of deducting development costs in the year paid or incurred, you can elect to treat the cost as deferred expenses and deduct them ratably as the units of produced ores or minerals benefited by the expenses are sold. Free state tax file This election applies each tax year to expenses paid or incurred in that year. Free state tax file Once made, the election is binding for the year and cannot be revoked for any reason. Free state tax file How to make the election. Free state tax file   The election to deduct development costs ratably as the ores or minerals are sold must be made for each mine or other natural deposit by a clear indication on your return or by a statement filed with the IRS office where you file your return. Free state tax file Generally, you must make the election by the due date of the return (including extensions). Free state tax file However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free state tax file Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Free state tax file 9100-2. Free state tax file ” File the amended return at the same address you filed the original return. Free state tax file Foreign development costs. Free state tax file   The rules discussed earlier for foreign exploration costs apply to foreign development costs. Free state tax file Reduced corporate deductions for development costs. Free state tax file   The rules discussed earlier for reduced corporate deductions for exploration costs also apply to corporate deductions for development costs. Free state tax file Circulation Costs A publisher can deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical. Free state tax file For example, a publisher can deduct the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. Free state tax file Circulation costs are deductible even if they normally would be capitalized. Free state tax file This rule does not apply to the following costs that must be capitalized. Free state tax file The purchase of land or depreciable property. Free state tax file The acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical, including the purchase of another publisher's list of subscribers. Free state tax file Other treatment of circulation costs. Free state tax file   If you do not want to deduct circulation costs as a current business expense, you can elect one of the following ways to recover these costs. Free state tax file Capitalize all circulation costs that are properly chargeable to a capital account (see chapter 1 ). Free state tax file Amortize circulation costs over the 3-year period beginning with the tax year they were paid or incurred. Free state tax file How to make the election. Free state tax file   You elect to capitalize circulation costs by attaching a statement to your return for the first tax year the election applies. Free state tax file Your election is binding for the year it is made and for all later years, unless you get IRS approval to revoke it. Free state tax file Business Start-Up and Organizational Costs Business start-up and organizational costs are generally capital expenditures. Free state tax file However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. Free state tax file The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Free state tax file Any remaining costs must be amortized. Free state tax file For information about amortizing start-up and organizational costs, see chapter 8 . Free state tax file Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. Free state tax file Organizational costs include the costs of creating a corporation. Free state tax file For more information on start-up and organizational costs, see chapter 8 . Free state tax file How to make the election. Free state tax file   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. Free state tax file However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free state tax file Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Free state tax file 9100-2. Free state tax file ” File the amended return at the same address you filed the original return. Free state tax file The election applies when computing taxable income for the current tax year and all subsequent years. Free state tax file Reforestation Costs Reforestation costs are generally capital expenditures. Free state tax file However, you can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. Free state tax file The remaining costs can be amortized over an 84-month period. Free state tax file For information about amortizing reforestation costs, see chapter 8 . Free state tax file Qualifying reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Free state tax file Qualified timber property is property that contains trees in significant commercial quantities. Free state tax file See chapter 8 for more information on qualifying reforestation costs and qualified timber property. Free state tax file If you elect to deduct qualified reforestation costs, create and maintain separate timber accounts for each qualified timber property and include all reforestation costs and the dates each was applied. Free state tax file Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. Free state tax file How to make the election. Free state tax file   You elect to deduct qualifying reforestation costs by claiming the deduction on your timely filed income tax return (including extensions) for the tax year the expenses were paid or incurred. Free state tax file If Form T (Timber), Forest Activities Schedule, is required, complete Part IV of Form T. Free state tax file If Form T is not required, attach a statement containing the following information for each qualified timber property for which an election is being made. Free state tax file The unique stand identification numbers. Free state tax file The total number of acres reforested during the tax year. Free state tax file The nature of the reforestation treatments. Free state tax file The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. Free state tax file   If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free state tax file Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Free state tax file 9100-2. Free state tax file ” File the amended return at the same address you filed the original return. Free state tax file The election applies when computing taxable income for the current tax year and all subsequent years. Free state tax file   For additional information on reforestation costs, see chapter 8 . Free state tax file Recapture. Free state tax file   This deduction may have to be recaptured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the expenditure. Free state tax file For more information on recapturing the deduction, see Depreciation Recapture in Publication 544. Free state tax file Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. Free state tax file However, if you replace a component (part) of a depreciable asset, capitalize the removal costs if the replacement is an improvement and deduct the costs if the replacement is a repair. Free state tax file Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. Free state tax file However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. Free state tax file You must own or lease the facility or vehicle for use in connection with your trade or business. Free state tax file A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. Free state tax file A public transportation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your customers, even if you are not in the business of providing transportation services). Free state tax file You cannot deduct any costs that you paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property in the normal course of business. Free state tax file Deduction limit. Free state tax file   The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. Free state tax file However, you can add any costs over this limit to the basis of the property and depreciate these excess costs. Free state tax file Partners and partnerships. Free state tax file   The $15,000 limit applies to a partnership and also to each partner in the partnership. Free state tax file A partner can allocate the $15,000 limit in any manner among the partner's individually incurred costs and the partner's distributive share of partnership costs. Free state tax file If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. Free state tax file   A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). Free state tax file If the partnership cannot show this, it is presumed that the partner was able to deduct the distributive share of the partnership's costs in full. Free state tax file Example. Free state tax file Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. Free state tax file Emilio had $12,000 of similar expenses in his sole proprietorship. Free state tax file He elected to deduct $7,000 of them. Free state tax file Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. Free state tax file Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. Free state tax file Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partnership's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. Free state tax file Qualification standards. Free state tax file   You can deduct your costs as a current expense only if the barrier removal meets the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. Free state tax file You can view the Americans with Disabilities Act at www. Free state tax file ada. Free state tax file gov/pubs/ada. Free state tax file htm. Free state tax file   The following is a list of some architectural barrier removal costs that can be deducted. Free state tax file Ground and floor surfaces. Free state tax file Walks. Free state tax file Parking lots. Free state tax file Ramps. Free state tax file Entrances. Free state tax file Doors and doorways. Free state tax file Stairs. Free state tax file Floors. Free state tax file Toilet rooms. Free state tax file Water fountains. Free state tax file Public telephones. Free state tax file Elevators. Free state tax file Controls. Free state tax file Signage. Free state tax file Alarms. Free state tax file Protruding objects. Free state tax file Symbols of accessibility. Free state tax file You can find the ADA guidelines and requirements for architectural barrier removal at www. Free state tax file usdoj. Free state tax file gov/crt/ada/reg3a. Free state tax file html. Free state tax file   The costs for removal of transportation barriers from rail facilities, buses, and rapid and light rail vehicles are deductible. Free state tax file You can find the guidelines and requirements for transportation barrier removal at www. Free state tax file fta. Free state tax file dot. Free state tax file gov. Free state tax file   Also, you can access the ADA website at www. Free state tax file ada. Free state tax file gov for additional information. Free state tax file Other barrier removals. Free state tax file   To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. Free state tax file The removed barrier must be a substantial barrier to access or use of a facility or public transportation vehicle by persons who have a disability or are elderly. Free state tax file The removed barrier must have been a barrier for at least one major group of persons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). Free state tax file The barrier must be removed without creating any new barrier that significantly impairs access to or use of the facility or vehicle by a major group of persons who have a disability or are elderly. Free state tax file How to make the election. Free state tax file   If you elect to deduct your costs for removing barriers to the disabled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. Free state tax file Identify the deduction as a separate item. Free state tax file The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. Free state tax file If you make this election, you must maintain adequate records to support your deduction. Free state tax file   For your election to be valid, you generally must file your return by its due date, including extensions. Free state tax file However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free state tax file Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Free state tax file 9100-2. Free state tax file ” File the amended return at the same address you filed the original return. Free state tax file Your election is irrevocable after the due date, including extensions, of your return. Free state tax file Disabled access credit. Free state tax file   If you make your business accessible to persons with disabilities and your business is an eligible small business, you may be able to claim the disabled access credit. Free state tax file If you choose to claim the credit, you must reduce the amount you deduct or capitalize by the amount of the credit. Free state tax file   For more information, see Form 8826, Disabled Access Credit. Free state tax file Film and Television Production Costs Film and television production costs are generally capital expenses. Free state tax file However, you can elect to deduct costs paid or incurred for certain productions commencing before January 1, 2014. Free state tax file For more information, see section 181 of the Internal Revenue Code and the related Treasury Regulations. Free state tax file Prev  Up  Next   Home   More Online Publications